Indian Industry Finally Warming Up To Cleaner Gas?

Is the Indian industry finally shifting its energy consumption towards cleaner natural gas? Yes, there are telltale signs of the change. Country’s LNG imports rose by 33 per cent during 2014-17, compared with the modest growth of 13 per cent in crude oil import volumes.

India’s LNG imports stood at 50.78 million metric standard cubic meter per day (mmscmd) in 2014-16 but rose to 67.63 mmscmd in 2016-17. During the same period, crude import rose from 189.4 million metric tonne (mmt) to 67.63 mmt.

The share of natural gas in India’s primary energy consumption stood at the low level of 6.5 per cent in 2015, compared with the global average of 23.8 per cent, according to BP Statistical Review.

The Narendra Modi government has targeted to raise the share of natural gas in country’s primary energy consumption to 15 per cent . This offers huge growth opportunities for companies like Gail, Petronet, GSPL and Shell operating in the gas space.

The government’s focus on increasing gas consumption seems to be paying off, with the share of green fuel inching up to 7 per cent in 2016.

Meanwhile, petroleum minister Dharmendra Pradhan has said that the government plans to develop a gas trading hub. “We are in the process of reforming the gas market in India where you can sell through a gas trading hub,” Pradhan told a gathering of investors at the 22nd World Petroleum Congress held in Istanbul, Turkey, recently.

Pradhan’s announcement assumes significance because it would necessitate undertaking comprehensive policy, regulatory, taxation and pricing reforms in the gas sector.

For years, India struggled to step up gas consumption and the government kept marketing and pricing control with it to prioritise scarce gas supplies.

Domestic gas shortages and high cost of imported LNG, coupled with the government’s intervention policies, have hobbled development of pipeline connectivity.

But now it seems that both the industry and the government are on the same page so far as the shift towards cleaner energy fuels is concerned. The recent crash in global LNG market since the middle of 2014 and government’s emphatic endorsement of the Paris climate accord appear to have added new momentum to the change.

The rising LNG imports is due to the widening gap in demand and supply of domestic gas.